Hi Alex, any thoughts as to what affect this kind of thing may have on the $US.
Indonesia starts repaying overseas loans in rupiah
Singapore
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20 JANUARY
THE CORPORATE and banking sectors in Indonesia have begun to repay overseas debt in local currency, offering foreign lenders either rupiah on time or dollars late, dealers and analysts in Singapore said.
Sources say some lenders are taking up the offer. Indonesia's already heavy overseas debt burden has ballooned in terms of the rupiah due to the currency's 75 per cent decline from 2,400 per dollar in July at the start of the Asian crisis to 10,000 now.
The Indonesian private sector is being crushed under the weight of the burgeoning debt, and market sources said foreign banks will now take a risk on the currency rather than wait for dollars.
''We are seeing a significant amount of Indonesian Banks settling US dollars due in rupiah,'' a Singapore-based analyst said. ''Banks have been accepting this and it seems to be gathering momentum.'' ''Lenders are simply not willing to wait. When Indonesian entities, or banks, say you can have dollar's settled tomorrow or rupiah today, people are opting for the rupiah.''
According to the Memorandum of Understanding drawn up between the IMF and Indonesia after last week's meetings, the country's external debt stood at around $140 billion at the end of last year, or about two-thirds of gross domestic product (GDP), and of this some $20 billion was short-term.
Around $65 billion of this lies in corporate hands and there is around $15 billion of commercial paper.
Sources said only Indonesian banks had been seen doing this, but in all probability the Indonesian corporates were offering the same deal to their domestic banks on US dollars due.
''I can tell you this has happened in the case of Indonesian banks with international banks,'' a banking source said. ''I can't say whether the Indonesian corporates are doing the same thing to Indonesian banks.''
Sources said the deals were being done at the market and the vast majority of the rupiah was finding its way back into the market via spot and forwards.
''Most would want to lock in the US dollar rate and square the rupiah position off,'' another Singapore-based analyst said.
''Either on spot or forward and I think that's why spot rupiah has been under pressure. I can't see offshore parties at this stage holding an open position in the roop (rupiah).''
Last Friday the rupiah closed at 8,300 per dollar and today it was trading at 10,000, a fall of 17 per cent. - Reute |
